Assignment 2: Outsourcing an MNC – Part 2

Outsourcing

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The Walter Family Corporation is an organization that was started around 1978. The company deals in the production and sale of computers and smartphones. The origins of the corporation are traced back to Michigan State. The Corporation is a family business that was started by John Walters, a computer whiz who made the decision to make something of his passion. Currently, the company operates in over 40 countries around the globe. The company has stayed competitive because of innovative strategies from the young and experienced management team. The success of the corporation is also attributed to development and research that ensured the company, continues to produce innovative technology and remain competitive. The team have been at the center of corporation success.

Multinational corporations are at the center of international business. They play a very significant role in deepening globalization and transfer of technology across region. The Walter Family Corporation has many branches in different countries. These branches are managed and coordinated by the top management. They enhance international business by making it possible to send workers from different countries as expatriates to other countries. The corporation exports information technology products and services to many countries. These products and services are exchanged for money. Walter Family Corporation employs many people in the different country that has its branches. The corporation facilitates international business by enhancing the flow of goods and services from one country to another.

It is obvious that multinational corporations benefit so much from globalization. Globalization has made it relatively easy for these corporations to open branches in multiple countries around the globe (Neelankavil & Rai, 2009). They can easily transfer products and services for labor among multiple nations. The Walter Family Corporation seems to enjoy these benefits as well. Globalization has made it relatively easy for the corporation to access new markets. Globalization has been instrumental in supporting the growth of the corporation.

Outsourcing as a management decision has been gaining ground due to the increased competitive in contemporary economies. Globalization has also played a role since it encourages companies to look for opportunities in the wide open market. There are many other reasons for outsourcing like low labor costs and access to enhanced technology. These advantages make the business it easy and cheap to run the business compared to performing all the functions in the domestic country. Outsourcing has continues to encourage the advancement of globalization.

The top two countries chosen as the best destination for outsourcing Information Technology department are China and India. India has been ranked as a top outsourcing destination for a long time. At the same time, China has made huge strides in terms of technological advancement, infrastructure, and labor. These factors have served to make China a very attractive outsourcing destination.

India is considered a very good outsourcing destination because it has a very skilled labor force that is relatively cheap to hire and maintain. It has experienced skilled and ample resources. The cost of labor in India is very low when compared to the developed countries like the USA. In effect, companies, which want to reduce production costs, tend to outsource to India. It has a favorable taxing system and a good regulatory environment. Furthermore, India has very good financial structure that makes it easy to for business to flourish.

China has been making leaps in economic development. The country continues to make headlines by implementing huge infrastructure projects. The available infrastructure serves to make China a good destination for outsourcing. China and India have good economic systems, which are supported by availability of enough labor. India has a high labor pool while China has a medium labor pool. Both China and India possess medium level infrastructure that is yet to match those of developed economies. The Business and political environment for China is low while for India it is high. It might be because of the strict rules that are enforced by the government of China. However, it is imperative to note that China does not interfere with functions of corporations if they do not disobey the laws of the country. Government involvement in business in both countries is minimal.

In terms of technological advancement, China is much ahead of India. China is known to have the second fastest supercomputer in the world. It is s large economy that comes second only to United States, which is the world superpower. However, when it comes to IT, India has a more skilled labor force than China. The cost of the labor force in China and India are both cheaper than the labor cost in the United States. The fate of ethics and social responsibility in both China and India is appropriate for foreign companies. Many companies participate in charity activities to promote communities and give back to the people. China and India are very good outsource of destinations for IT because they can have ample skilled labor, technology advancement and e-business capabilities are very good.

Hofstede’s four dimensions of culture are power/distance, uncertainty/avoidance index, masculinity and individualism (Luger, 2009). The power/distance dimension centers on the fact that not everyone in a society is equal. It talks about the distance that exists between those with power and those who do not have the power. These dimensions are used to rank countries to determine how employees would behave in an organization. Each dimension measures a particular trait that prevails in a given society.

China as a ranking of 80 when it comes to the power/distance dimension (Hofstede Center, n.d.). The Chinese society believes and accepts that people cannot be equal. In China, the relation between a subordinate and the superior is highly polarized. The defense against abuse by superiors is almost nil. Individuals are under the heavy influence of sanctions and authority. People are discouraged from possessing aspirations that go beyond one’s rank. Individualism looks the level of interdependence among society members. China is a collectivist country. Individuals tend to act in the interest of the group. Considerations with groups affect promotions and employment. Closer in-groups like family get preference during job vacancies and promotions. Personal relationship comes before the company and assigned tasks.

China scores high when viewed from the masculinity dimension. It means the Chinese society is driven by competition and achievement. The definition of success depends on the winner. The stiff competition starts from school and continues all through to organizational systems. The level of masculinity is evidenced by the fact that many Chinese can easily give up family and leisure time for work. China has scores low in the uncertainty dimension. The Chinese are comfortable with ambiguity. The Chinese language, which is full of ambiguous meaning evidences it.

India scores high in power/distance dimension. The society accepts that people cannot be equal in a society. Indians depend on their bosses for direction. One is not allowed to question authority (Hofstede Center, n.d.). When it comes to the individualism dimension, Indians is considered both individualistic and collectivistic. India also scores relatively high in masculinity. In highly masculine societies, the hunger for success and competition is given priority. However, people do not display a very competitive nature openly because of the religious laws that exist within the society. Indians are very religious people. Indians do not like uncertainty. They have a very high tolerance for what is unexpected since traditional India. In fact, they consider a break from the monotony of life. They can accept imperfection easily with no major concerns. In situations, where something proves too difficult to achieve it can be avoided. The belief is that rules are there to be avoided if necessary. One can use other innovative means to bypass the hurdles that rules seem to present. The attitude is both a curse and a blessing to the country.

China occupies a good position in Asia. The size and location of the Peoples Republic of China make it possible to access major economies found in Asia. China has sway over many countries in Asia. Its size and wealth have given the country power to influence actions and business in the region. Therefore, China has a good regional integration. India also plays a significant role in South Asia. India has a strong economy compared to the surrounding countries. Its size has made it a major player in the linkup between South East Asia and South Asia. Both China and India can influence regional integration.

Based on the analysis, the company should consider China as the destination for outsourcing its information technology department. The business environment for China is suitable for the corporation. The country continues to develop the quality and skill of its labor force. Furthermore, the company will have access to a cheaper labor force. China has good e-business accessibility. A good e-business accessibility infrastructure will make it easy for the IT department to perform all functions of no problems. The presence of many outsourced companies means it will take a short time for the IT department to start functioning. The competitive nature of the Chinese people will have a positive impact on the total work output.

References

Hofstede Center. (n.d.). What About China? Retrieved from The Hostede Center: http://geert-hofstede.com/china.html

Hofstede Center. (n.d.). What About India? Retrieved from The Hofstede Center: http://geert-hofstede.com/india.html

Luger, E. (2009). Hofstede's Cultural Dimensions. München GRIN Verlag GmbH.

Neelankavil, J. P., & Rai, A. (2009). Basics of International Business. M.E. Sharp Inc.